DELHI: Presently, the real estate sector in India is facing several challenges. These include lack of adequate sources of finance, shortage of labour, steep rise in the prices of raw material, multiple tax system and lengthy and delayed procedures for approvals.
Funds are the basic requirement for any real estate project. These may be arranged through banks by availing loans. Another way to generate funds for the real estate sector is through Foreign Direct Investment (FDI). According to available information, the real estate sector in India has attracted a cumulative FDI worth over US $22 billion during the April 2000-June 2013 period.
Besides, small and big investors are also the source of finance for the realty developers. Despite all this, developers face shortage of funds. They have to arrange funds through loans from banks at a higher rate of interest. The government should fix reasonable interest rates for the real estate sector, considering the fact that the economy of a nation revolves around this particular sector besides other major sectors.
There is a dire need for the government to provide financial benefits to players in the real estate sector to build low cost and affordable housing for the masses across the country. Also, there is a need for reviewing the existing FDI guidelines for investment and development. Relaxation in FDI guidelines will further boost investment and development in this particular sector. Rather, the whole economy of the country will get a boost.
The cost of construction is increasing day-by-day. If one calculates, one finds that the cost of construction has risen by around 40 per cent in the last 24 months, approximately.
This is because of many factors. The bank rates are high. Many projects are getting delayed because of lengthy and complex procedures of sanctions from various government departments and ministries. The government, both at the state and the Centre, should try to simplify the procedures meant for approvals or sanctions for the real estate projects.
These delays also lead to escalation of cost. There was a slowdown to some extent also in the recent past. This also put an adverse effect on the real estate projects.
These days the real estate sector is not only facing labour shortage but is also under heavy pressure to pay increased wages to the labour. It has been observed that significant number of labourers have returned to their homes states after the start of the Government of India’s MNREGA programme. Labourers find it easy to get jobs at decent wages close to their respective homes. The real estate sector is likely to face more labour shortage in the coming time because labourers are getting attracted towards the MNREGA after listening about benefits of the MNREGA programme from others in their circle.
Therefore, the government must come forward to protect and boost the real estate sector by redressing problems and difficulties being faced by developers across the country.